Gravity (GRVY)

We compete primarily with other massively multiplayer online
role playing game developers and distributors in each of our
markets. In addition, we compete against providers of games on
various platforms, such as console games, handheld games, arcade
games and mobile games. We compete primarily on the basis of the
quality of the online game experience offered by us to our
users, which depends on a number of factors, including our
ability to do the following:



hire and retain creative personnel to develop games that appeal
to our users;



maintain an online game platform that is stable and is not prone
to server shutdowns, connection problems or other technical
difficulties;



provide timely and responsive customer service; and



establish payment systems that are secure and efficient.

Competition
in Korea

The online game market in Korea is comprised of massively
multiplayer online game market, casual online games market and
portal-based online games market. As many of our competitors
have significantly greater financial, marketing and game
development resources than we have, we face intense competition
in the online game industry. We expect competition will continue
to be strong as the number of domestic massively multiplayer
online game developers in Korea increases in the future and the
online game industry begins to consolidate into a small number
of leading massively multiplayer online role playing game
companies due to the high cost of game development, marketing
and distribution networks, which is likely to drive unsuccessful
massively multiplayer online role playing game providers to go
out of business or be acquired by other successful game
providers.

Currently, the leading providers of massively multiplayer online
games in Korea, based on the number of peak concurrent users,
are NCsoft Corporation, or NCsoft, CJ Internet Corporation,
or CJ Internet, Neowiz Games and Activision Blizzard
according to data available from various public sources. NCsoft
released Aion in November 2008, which became the most popular
massively multiplayer online role playing game in Korea as of
May 31, 2009, based on statistical information from the
Korea Creative Content Agency. NCsofts Lineage, which was
released in 1998, and Lineage II, a sequel to the original
Lineage in 2003, gained dominant popularity and have maintained
both a large number of players and a loyal user base in Korea.
CJ Internet commercially launched Sudden Attack in 2006,
which is the most popular massively multiplayer online first
person shooter game in Korea. Neowiz Games released Special
Force, a massively multiplayer online first person shooter game,
in 2004 and FIFA Online, a soccer game which was co-developed
with Electronic Arts in 2006. Neowiz Games has also been
developing additional online games with Electronic Arts, its
second largest shareholder, who owns approximately
12.6 percent of its common shares. The leading companies in
the market for casual online games include Nexon, which is
developed for Maple Story and Kart Rider, and Yedang Online,
publisher of the dance game, Audition. The leading providers of
portal-based online games in Korea are NHN Corporation,
operating under the brand portal of Hangame, CJ Internet,
operating under the brand portal of NetMarble, and Neowiz Games,
operating under the brand portal of Pmang.

Competition
in overseas markets

In each of the overseas markets in which Ragnarok Online is
distributed, we face strong competitive pressures. For example,
Japans large game market is primarily driven by console
games although online games are gaining popularity among
Japanese game users. Consequently, many Japanese console game
developers, such as Capcom Entertainment, Inc., or Capcom, and
Koei Co., Ltd., or Koei, have expanded their businesses to
online game development with their well-known brands and
advanced overall game development systems, which have resulted
in more intense competition in the Japanese online game market.
For example, Capcom developed and released

Monster Hunter Frontier Online, an action online game based on
its best-selling package game Monster Hunter Frontier, in June
2007. Koei also developed and released online games based on its
best-selling package games such as Nobunagas Ambition
Online, Uncharted Waters Online, Dynasty Warriors Online and
Sangokushi Online. Taiwans online game industry has
demonstrated significant growth in recent years with the market
dominated by games developed in China and Korea. Our principal
competitors in Taiwan include Activision Blizzard, NCsoft and
Nexon Corporation. Thailand is also a fast growing online game
market in Asia, where we believe that Ragnarok Online is the
dominant online game based on the number of peak concurrent
users, as reported by local game magazines and our
licensees reports. There are many online game developers
and distributors in China such as The9 Limited, which
publishes World of Warcraft, and Shanda Interactive
Entertainment, whose principal product is Mir II.

Competition
from other game platforms

We also compete against PC- and console-based game developers
that produce popular package games, such as Electronic Arts,
Nintendo, Activision Blizzard and Sony Computer Entertainment,
and game console manufacturers such as Microsoft, Sony Computer
Entertainment and Nintendo, all of which also have their own
console game development studios. In May 2002, Sony Computer
Entertainment started distributing its PlayStation 2 game
consoles equipped with a network adapter to enable online gaming
and in November 2002, Microsoft started an online game service
for its Xbox Live consoles. Microsoft launched an enhanced
version of its console platform in November 2005 with the
Xbox360 and Sony Computer Entertainment launched an enhanced
version of its console platform in November 2006 with the
PlayStation 3, both of which provide services for online
games. Nintendo launched its Wii console platform in November
2006. A number of PC-based game developers are also introducing
online features to their PC-packaged games, such as team plays
or
users-to-users
combat features. Moreover, handheld game consoles are also
popular among game users. In November 2004, Nintendo launched
Nintendo DS, a sequel to Gameboy Advance, and Sony Computer
Entertainments PlayStation Portable was released in
December 2004.

Competition in the online game market is and is expected to
remain intense as established game companies with significant
financial resources seek to enter the industry. For a discussion
of risks relating to competition, See ITEM 3.D. RISK
FACTORS  RISKS RELATING TO OUR BUSINESS 
We operate in a highly competitive industry and compete against
many large companies.

We compete primarily with other massively multiplayer online
role playing game developers and distributors in each of our
markets. In addition, we compete against providers of games on
various platforms, such as console games, handheld games, arcade
games and mobile games. We compete primarily on the basis of the
quality of the online game experience offered by us to our
users, which depends on a number of factors, including our
ability to do the following:



hire and retain creative personnel to develop games that appeal
to our users;



maintain an online game platform that is stable and is not prone
to server shutdowns, connection problems or other technical
difficulties;

We compete primarily with other massively multiplayer online
role playing game developers and distributors in each of our
markets. In addition, we compete against providers of games on
various platforms, such as console games, handheld games, arcade
games and mobile games. We compete primarily on the basis of the
quality of the online game experience offered by us to our
users, which depends on a number of factors, including our
ability to do the following:



hire and retain creative personnel to develop games that appeal
to our users;



maintain online game platform that is stable and is not prone to
server shutdowns, connection problems or other technical
difficulties;



provide timely and responsive customer service; and



establish payment systems that are secure and efficient.

Competition
in Korea

The online game market in Korea is comprised of the massively
multiplayer online game market, the casual online games market,
which includes casual sports games, and the portal-based online
games market, which includes online card games. Currently, the
leading providers of massively multiplayer online games in Korea
are NCsoft Corporation, Neowiz and CJ Internet Corporation based
on the number of peak concurrent users. NCsoft released
Lineage II, a sequel to the original Lineage in July 2003.
Lineage II is an enhanced version of the original Lineage
game released in 1998, which gained dominant popularity in
Korea. Neowiz released Special Force, a massively multiplayer
online first person shooter, in July 2004 and FIFA Online, which
was co-developed with Electronic Arts, in 2006. CJ Internet
commercially launched Sudden Attack, a very popular massively
multiplayer online first person shooter, in July 2006. In the
market for casual online games, Nexon, which is renowned for
Kart Rider, an extremely popular online racing game and Yedang
Online, whose online dance game Audition has gained a large user
base, are among the leading companies. The leading providers of
portal-based online games in Korea are NHN Corporation,
operating under the brand portal of Hangame, CJ Internet,
operating under the brand portal of NetMarble and Neowiz
Corporation, operating under the brand portal of Pmang. Many of
our competitors have significantly greater financial, marketing
and game development resources than we have.

While the number of domestic massively multiplayer online game
developers in Korea may increase in the future, we expect the
online game industry will consolidate into a small number of
leading massively multiplayer online role playing game companies
as the high cost of game development, marketing and distribution
networks drives a greater number of unsuccessful massively
multiplayer online role playing game providers to go out of
business or be acquired.

Competition
in overseas markets

In each of the overseas markets in which Ragnarok Online is
distributed, we face strong competitive pressures. For example,
Japans large game market is primarily driven by console
games although online games are gaining popularity among
Japanese game users. Our major competitors in Japan are Square
Enix Co., Ltd., well-known for its Final Fantasy games, and
Nexon Corporation. Taiwans online game industry has
demonstrated significant

growth in recent years with the market dominated by games
developed in Korea. Our principal competitors in Taiwan include
Blizzard Entertainment, NCsoft Corporation and Nexon
Corporation. Thailand is also a fast growing online game market
in Asia, where we believe that Ragnarok Online is the dominant
online game based on the number of peak concurrent users. There
are many online game developers and distributors in China such
as The9 Limited, which publishes the World of Warcraft, and
Shanda Interactive Entertainment.

Competition
from other game platforms

We also compete against PC- and console-based game developers
that produce popular package games, such as Electronic Arts,
Sony Computer Entertainment, Blizzard Entertainment and Namco,
and game console manufacturers such as Microsoft, Sony Computer
Entertainment and Nintendo. In 2002, Microsoft and Sony
introduced Internet-enabled video consoles and we believe that
they plan to enhance their respective game platforms to provide
online games. For example, Sony Computer Entertainment started
distributing the PlayStation 2 game consoles, equipped with a
network adapter to enable online game beginning in May 2002, and
Microsoft started an online game service on Xbox Live consoles
beginning in November 2002. Several PC-based game developers are
introducing online features to their PC-packaged games, such as
team plays or
users-to-users
combat features. In 2005 and 2006, they launched enhanced
version of their console platforms. Microsofts Xbox360 was
launched in November 2005, followed by Sony Computer
Entertainments PlayStation 3 and Nintendos Wii in
November 2006. Moreover, handheld game console is also getting
popular among game users. In November 2004, Nintendo launched
Nintendo DS, a sequel to Gameboy Advance, and Sony Computer
Entertainments PlayStation Portable was released in
December 2004.

Competition in the online game market is and is expected to
remain intense as established game companies with significant
financial resources seek to enter the industry. For a discussion
of risks relating to competition, see Item 3.D. Risk
Factors  Risks Relating to Our Business 
We operate in a highly competitive industry and compete against
many large companies.